December 1, 2008

First, Arrest All The Economists

In the United
States, we put economists in the cabinet. In
India,
they make them prime ministers. In Latvia, they
put them in jail--the pessimistic ones, at least. According to the Wall Street Journal, Latvian security
agents recently
detained university lecturer Dmitrijs Smirnovs after he told an audience, “All
I can advise is this: First, don't keep money in banks. Second, don't keep
money in lats,” the national currency. Smirnovs was released, but agents seized
his computer and told him not to leave the country. Turns out that it’s illegal
to speak ill of the Latvian economy--or, in Soviet-speak, spreading “untruthful
information.” He’s not the first, and despite a press uproar, he’s unlikely to
be the last.

There is no excuse for such a breach of civil liberties,
particularly in a country well on its way to full membership in the club of the
west. But there is an explanation, and it points to a dilemma at the
intersection of globalization and democracy. Latvia’s is a relatively small economy,
but it is a dynamic, modern one, fully incorporated into the international
market. As a result, it is more vulnerable to economic shocks than larger
countries, and more susceptible to private manipulations. In the grand sweep of
history, periods of globalization saw small states, like small firms, destabilized
and even gobbled up by larger states, and state interventions to control the
market or investors were expected. But in the twenty-first century, we expect
governments to respect their citizens civil liberties, even when their exercise
could undermine national economic stability. So what’s the answer?